Berkshire Hathaway is planning to cut ties with one of its longstanding (and rare) blunders following the exit of Warren Buffett. The company is now seeking to sell its 28% stake in Kraft Heinz after nearly a decade — months after the packaged foods maker announced plans to split into two independent public companies.
Kraft Heinz had announced plans to ‘reverse’ its 2015 merger in September last year amid continued challenges. The move will create “two independent, publicly traded companies through a tax-free spin-off”. The plan has also garnered criticism from Buffett who has previously admitted that the merger was a “rare misstep” on his part.
Berkshire to exit 28% stake in Kraft Heinz?
According to a regulatory filing, the company is now taking formal steps to unwind the rare blunder made by Buffett in 2015. Berkshire Hathaway recently registered its entire 27.5% stake in Kraft Heinz for resale — likely preparing to exit its position in the hot dog and macaroni-and-cheese maker.
The ketchup giant tagged more than 325.44 million shares for potential resale by major shareholders 3G Global Food Holdings LP and Berkshire Hathaway. The stock has dropped more than 70% from its 2017 peak — with market value plummeting from $110 billion to under $33 billion.
‘We overpaid for Kraft’
Buffett had partnered with 3G Capital on the 2015 merger of Kraft and Heinz — creating a consumer goods giant valued initially at around $24 billion. He had purchased HJ Heinz for $23.3 billion in 2013 and emerged with more than 325 million shares after the tie-up.
But aggressive cost-cutting measures, overpayment for assets, and failure to adapt to market shifts had taken a heavy toll on the company. Berkshire Hathaway has taken repeated hits over the past decade due to its involvement with Kraft Heinz — including a $3.8 billion write-down on the value of its holding last year.
“Well, we did overpay. We didn’t overpay for Heinz when we bought it. Originally. It was a 50-50 private deal with 3G. We had two stockholders. And then we overpaid for Kraft, we wrote down $15 billion of that…” Buffett had told CNBC during a live interview in 2019.